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Conceptual Feasibility Report

August, 2006

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SOUTHERN CALIFORNIA EDISON COMPANYS ADVANCED METERING INFRASTRUCTURE CONCEPTUAL FEASIBILITY REPORT EXECUTIVE SUMMARY SCEs AMI Vision is Being Realized Southern California Edison Company (SCE) has held the conviction that the cost effectiveness of Advanced Metering Infrastructure (AMI) deployment could be greatly improved if certain critical functions and capabilities were added to the metering and communication systems. Although the ability to automatically connect and disconnect electric services and an open (non-proprietary) communications standard were technically feasible at the outset of SCEs Phase I AMI development effort, these functions and capabilities were not yet fully integrated into available metering products. Such added functionality and capabilities could substantially reduce the cost of field operations, encourage competition among meter and communications vendors, and enhance customer acceptance of time-differentiated pricing and direct load control by enabling communication with multiple in-house load control devices and information systems. SCEs vision is to develop the meter and communications systems technical requirements necessary to fully integrate currently available modernday technology into a new generation of meters that can provide SCE additional operational benefits that outweigh any cost increase associated with the enhanced functionality. In part due to SCEs efforts over the last eight months, and in part due to the rapid evolution of metering and communication systems technology over this same period of time, SCEs vision is being realized. As fully described in Chapter III of this report, SCE is now confident that an AMI solution that meets its metering and communication systems requirements will soon be available from vendors. The added functionality of this next-generation of meters is expected to reduce costs and add benefits that will result in a positive business case for full AMI deployment. At this stage, SCE has determined that its proposed AMI solution is conceptually feasible. This conclusion is based on the conceptual design, the market assessment, product demonstrations and the positive financial assessment SCE has conducted. The results of these activities are presented in this report. Overview This report provides a mid-term Phase 1 update summarizing the status of SCEs progress toward completing the scheduled activities of Phase 1 of its AMI Project. It also summarizes and provides access to the deliverables related to the Concept Definition stage of Phase 1. 1 There are two objectives in this stage of the AMI Project. The first objective is to define the conceptual design requirements that support a cost-effective, system-wide deployment of AMI. The second
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The Phase 1 activities are described in the Settlement Agreement adopted in Commission Decision (D.)05-12-001, issued December 1, 2005 in Application (A.)05-03-026.
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objective is to conduct a market assessment to determine if there are metering and communication systems that can meet SCEs AMI requirements. Both of these objectives have been met and are addressed in Chapters III and IV of this report. SCE is now well underway with completing the second stage of activities associated with Phase 1. The key activities of the Concept Definition stage are described briefly in this summary and more thoroughly in the report. This Conceptual Feasibility Report is itself one of the interim Phase 1 deliverables. Other deliverables discussed in this report include the AMI Requirements Documentation, and the results of the Market Assessment. Results of the market assessment are the subject of Chapter III of this report. AMI requirements documentation is available on SCEs website 2 and is described in Appendix A of this report. Newly Identified Benefits Drive Financial Feasibility in a Positive Direction SCE has conducted a preliminary AMI business case analysis, and the results indicate that the potential benefits exceed the costs. From the negative net present value (NPV) of $490 million determined in the March 2005 analysis, SCE now shows a significant directional improvement resulting in a positive NVP estimate of $24 million. Chapter II of this report addresses the financial impact of the new system functionality and related assumptions which form the basis for SCEs continued positive outlook regarding the financial feasibility of AMI. A full assessment of the potential benefits and costs of SCEs AMI concept will be a major focus of the remainder of Phase 1 activities, incorporating the results of the Request For Proposals (RFP) for meters, communications, information systems and installation. SCEs AMI Project is On-Target and Ahead of Expectations SCEs accomplishments in the Concept Definition stage are ahead of expectations. As described in this report, all objectives associated with the first stage of Phase 1 have been met or exceeded, and the results are universally positive. The second stage of Phase 1 includes the documentation of engineering specifications and the release of a metering and a communications system Request for Proposal (RFP). SCE originally planned to conduct additional product design activities and testing of metering prototypes. However, it now appears that no further product design activities are necessary, and SCE now expects first-run production models will be available for testing in the second stage of Phase 1. Revised assumptions consistent with the functional improvements described throughout this report will support SCEs application for Phase 2 AMI funding expected to be filed in Fall 2006. SCE is making every attempt to shorten the overall time-frame required for the program, and is optimistic that there will be opportunities to accelerate the schedule. SCEs Collaborative Efforts with Other Stakeholders Have Helped to Encourage Product Development Through a deliberate collaborative process, SCE has proactively involved manufacturers of promising AMI technologies in ongoing dialogue focused on product enhancements and SCEs desired system functionality. Chapter III of this report describes how SCE shared its design requirements and concept
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http://www.sce.com/PowerandEnvironment/ami/TechDevelop.
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definition with communications vendors, meter vendors and utility industry groups over the last eight months. This process is helping to establish standards for a new generation of AMI-related meters and communication systems that can better address electric utility needs. These discussions, and the independent decisions that result from them, are acting as a catalyst to spur industry-wide product development efforts. A recent press release from one major meter manufacturer announced the deployment of its New and Advanced Metering and Communication Technology at Manitoba Hydro. 3 The capabilities of this new technology bear a strong resemblance to the metering capability requirements developed by SCE over the last eight months, illustrating that SCEs approach to AMI is already obtaining support from the vendor community as well as from other stakeholders across the country and around the world. Market Assessment Confirms Technical Feasibility of SCEs AMI Solution Chapter III of this report provides a summary of the results of SCEs market assessment. These results show that the capabilities defined through SCEs requirements gathering process are, in fact, feasible from a technical perspective. SCEs market assessment involved contacting over 100 vendors and followed a rigorous process with multiple steps and activities designed to influence the direction and timing of vendor AMI product development work. SCEs assessment of meter and communications vendors indicates that many are developing next generation technologies that closely align with SCE requirements. SCEs current assessment also indicates that prices for next generation meter and communications technologies should make these meters and technologies worthy of serious consideration by SCE and other utilities. SCE has drawn two primary conclusions from its market assessment: SCEs buy or design question is no longer an issue. SCE will not need to engage in AMI product design work, because vendors are developing next generation technologies that closely align with SCE requirements; and SCE expects metering and telecommunications products containing the necessary features and functionality will become commercially available from vendors in 2006. Meter Data Management System Plays a Key Role As described in Chapter III of this report, the business Use Case development and conceptual architecture activities identified the requirement for a Meter Data Management System (MDMS) to manage and process meter data for multiple uses. A market survey conducted during Phase 1 indicated that currently available products meet a majority of SCEs requirements. SCE expects the product development cycles of these vendors will deliver systems that will meet SCEs meter data management requirements. SCEs AMI Meter and Communications Systems Requirements are Complete By using a rigorous systems engineering methodology, SCE has defined a set of conceptual meter and communication system requirements for AMI that serve as a foundation for SCEs engagement of AMI
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Manitoba Hydro / ITRON Corp. Joint News Release, dated June 29, 2006.
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product vendors. The systems engineering approach employed a Use Case process involving 44 separate internal workshops and the participation of all of SCEs operations departments. SCEs systems engineering and Use Case processes are described in Chapter IV of this report. This set of requirements was also used to develop a conceptual architecture describing how the AMI system is expected to perform. This process resulted in documentation of over 400 requirements that are consistent with the recently ratified Utility/AMI High-Level Requirements. 4 The SCE requirements are described in Appendix B of this report. The Use Case documents and the complete set of requirements documentation are available on SCEs website (www.sce.com/PowerandEnvironment/ami) under the Technology Development and Vendor Information sections. 5 Use Case Process Defines Operational Benefits Besides defining the technical requirements of the metering and communications systems needed for AMI, the Use Case process provided the basis for determining what practical end uses and functionality can be added to SCEs financial assessment of AMI deployment. This process determined what benefits can be included in the revised business case and cost benefit analysis. Significant changes from SCEs previous assumptions include: Advances in communications coverage are expected to enable SCE to reach nearly all customers rather than the previously assumed 90%. This results in cost reductions associated with meter reading activities and billing costs due to fewer billing exceptions and fewer billing inquiries. Meter failure rates are expected to be cut in half as a result of a more stringent quality assurance and control approach working with vendors. Significant reductions in Field Service labor cost due to new customer services enabled by the remote connect/disconnect capability. More realistic assumptions related to customer participation in price response programs result in a significant reduction in marketing and customer communication costs. New assumptions relating to customer participation in direct load control programs reflect the fact that more reliable peak load reduction will enable SCE to defer capital investment in upgrades to existing sub-transmission and distribution facilities. Technology Demonstrations Are Underway Technology demonstrations and tests are an important part of SCEs feasibility assessment and project planning. SCE has conducted research on Home Area Network (HAN) communications protocols and mediums. The research examined both wired and wireless solutions including HomePlug, WiFI, ZigBee, Z-wave and proprietary solutions. The conclusion is that the ZigBee standard appears to be the industrys leading choice for HAN communications protocol for residential applications. This research was done in connection with developing requirements for the California Energy Commissions
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UtilityAMI recently adopted a set of high-level requirements for AMI meter and telecommunications systems to provide vendors some general guidelines as to currently desired AMI system functionality. The output of SCEs Use Cases has been adopted for integration with EPRIs IntelliGrid Architectural Model, which is widely used throughout the energy industry.
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(CEC) Title 24 Programmable Communicating Thermostat (PCT) that will be enabled by the AMI system in SCEs service area. In addition, SCE has just begun two component level tests that will be completed by the end of Phase 1. The first of these evaluates two types of remote disconnect switches. The second component test is a preliminary evaluation of radio frequency (RF) reception quality that SCE is conducting at a vacated residential site on a former military base to validate the RF coverage assumptions. Other related tests outside the funding purview of AMI are being monitored for potential application to AMI. One example is the recently completed six-month pilot test of narrowband power line communications, which tested remote, on-demand meter reading with 200 residential meters. This pilot involved three components: network management, substation control, and meters with an AMR module. These tests are helping SCE gain a better understanding of the feasibility and operating implications of these technologies.

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ADVANCED METERING INFRASTRUCTURE CONCEPTUAL FEASIBILITY REPORT TABLE OF CONTENTS Section I. II. Page

INTRODUCTION ...........................................................................................................................1 FINANCIAL ASSESSMENT .........................................................................................................4 A. Financial Feasibility of SCEs AMI Solution Remains Directionally Positive.................................................................................................................................5 1. 2. 3. 4. 5. 6. B. Improvements in Communication System Coverage ..............................................8 Remote Connect / Disconnect Capability ................................................................9 Deployment Schedule Changes and Reduced Meter Failure Rates.......................10 Demand Response Results Improved by Changes in Program Assumptions...........................................................................................................11 Previously Unidentified Benefits...........................................................................13 Benefits and Other Financial Aspects Under Evaluation ......................................14

SCEs Phase 1 System Design Demand Response Assumptions and Considerations....................................................................................................................15 1. Demand Response Overview.................................................................................15 a) b) 2. 3. Regulatory Considerations and Avoided Cost...........................................16 Tariff and Program Design Considerations ...............................................16

Key Assumptions to Demand Response Benefits Analyses ..................................18 Approach to Estimating Demand Response Benefits ............................................18 a) b) Time Differentiated Tariffs........................................................................20 Load Control Programs..............................................................................21

4. III.

Analysis of Demand Response Benefits ................................................................23

MARKET ASSESSMENT ............................................................................................................26 A. Approach to Market Assessment .......................................................................................26 1. Overview................................................................................................................26


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ADVANCED METERING INFRASTRUCTURE CONCEPTUAL FEASIBILITY REPORT TABLE OF CONTENTS (CONTINUED) Section 2. B. Page

Stakeholder and Industry Acceptance....................................................................27

Meter and Communications Market Assessment ..............................................................29 1. 2. 3. 4. 5. 6. 7. 8. Objectives ..............................................................................................................29 Product Segmentation ............................................................................................30 Product Supplier Research.....................................................................................31 Status of Next Generation AMI Technology Development...............................32 Framing Conceptual Capabilities TCM Model...................................................33 Ongoing Development Efforts...............................................................................33 Component/Product Testing and Risk Assessment ...............................................34 Market Assessment Key Findings .........................................................................35

C.

Meter Data Management System (MDMS) Market Survey ..............................................36 1. 2. 3. Role of Meter Data Management in AMI..............................................................36 MDMS Market Research and Survey ....................................................................37 MDMS Business Requirements.............................................................................39

D. E. IV.

Technology Demonstrations ..............................................................................................39 Acceptance of AMI Systems Among Other Utilities ........................................................40

SYSTEM DESIGN ........................................................................................................................43 A. B. C. Overview............................................................................................................................43 SCE AMI Engineering Principles......................................................................................46 Identifying AMI Requirements..........................................................................................48 1. 2. 3. Use Case Framework .............................................................................................48 Use Case Internal Workshop Process ....................................................................50 Use Case Workshop Completion and Documentation...........................................52
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ADVANCED METERING INFRASTRUCTURE CONCEPTUAL FEASIBILITY REPORT TABLE OF CONTENTS (CONTINUED) Section 4. 5. Page

AMI for Gas and Water Meters .............................................................................53 Requirements Refinement......................................................................................54 a) b) c) Distillation of Requirements ......................................................................54 Validation of Requirements (Cost Trade-Off Analysis)............................55 Validation of Requirements Against Market Availability .........................55

6. D.

Results and Conclusions from Requirements Gathering .......................................58

SCEs Conceptual Architecture for AMI...........................................................................59 1. 2. High Level Interface ..............................................................................................60 Component Architecture........................................................................................63

E. V.

Home Area Network ..........................................................................................................65

CONCLUSION..............................................................................................................................66 Appendix A Use Case Summaries Appendix B Description of SCEs AMI Preliminary Requirements Appendix C TCM Scales Metering Master Appendix D TCM Scales Communications Master Appendix E Architecture Components and Actors

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ADVANCED METERING INFRASTRUCTURE CONCEPTUAL FEASIBILITY REPORT LIST OF FIGURES Figure Page

Figure III-1 SCE Market Segmentation Approach ................................................................................... 31 Figure III-2 MDM System Functionality.................................................................................................. 37 Figure IV-3 AMI System of Systems Levels............................................................................................ 45 Figure IV-4 High Level Interface ............................................................................................................. 62 Figure IV-5 AMI System Conceptual Component Diagrams................................................................... 64

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ADVANCED METERING INFRASTRUCTURE CONCEPTUAL FEASIBILITY REPORT LIST OF TABLES Table Table II-1 AMI Directional Cost Benefit Analysis (Increased Benefits Compared to March 2005 Analysis)..................................................................................................................................7 Table II-2 Communication System Improvements (Compared to March 2005 Analysis).........................8 Table II-3 Remote Connect / Disconnect Capability (Compared to March 2005 Analysis) ....................10 Table II-4 Reduced Meter Failure Rates (Compared to March 2005 Analysis)........................................11 Table II-5 Demand Response Benefit Changes (Compared to March 2005 Analysis) ............................13 Table II-6 Previously Unidentified Changes (Compared to March 2005 Analysis) ................................14 Table II-7 Estimated Peak Load Reduction in 2015 for TOU and CPP Rates (All Classes) ....................21 Table II-8 Estimated Peak Load Reduction in 2015 for Load Control Programs Residential Class Only............................................................................................................................................................22 Table II-9 Assumptions for Avoided Procurement Costs (Nominal $2006) ...................................25 Table II-10 Net Demand Response Tariff and Load Control Program Benefits (Millions of 2008 PV $).................................................................................................................................................25 Table IV-11 Use Cases with Descriptive Titles.........................................................................................50 Table IV-12 TCM Categories Used to Evaluate Metering and Communications Capabilities.................57 Table IV-13 Service Disconnect Device....................................................................................................58 Page

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I.

INTRODUCTION

On December 1, 2005, Southern California Edison Company (SCE) received approval from the California Public Utilities Commission (the Commission) to implement Phase 1 of SCEs preferred strategy for deployment of an Advanced Metering Infrastructure (AMI) to SCEs business and residential customers. 6 Phase 1 is an eighteen-month process of developing the AMI concept that involves two stages: Concept Definition and Design and Feasibility. The Concept Definition stage consists of the following key activities: i) developing AMI technical and system requirements, ii) conducting technology demonstrations to validate functionality, iii) conducting cost trade-off analysis, iv) performing AMI conceptual feasibility analysis, v) developing reference architecture, vi) conducting market assessments, and vii) developing and releasing a request for proposal for an Engineering Design Contractor. 7 SCE estimated that the Concept Definition stage would require eight months from project approval to complete. Upon completion of the Concept Definition stage, SCE agreed to deliver several documents and assessments: AMI Requirements Documentation, Results of Market Assessment, and a Conceptual Feasibility Report. 8 Consistent with the activities described above, the first eight months of SCEs Phase 1 AMI project have included the following activities: A System Design process, in which Use Cases were used to identify the requirements of the desired AMI metering and communication systems;

See Decision (D.)05-12-001, approving the all-party Settlement Agreement on the outstanding issues of Phase 1 of SCEs Application for Approval of Advanced Metering Infrastructure Deployment Strategy and Cost Recovery (A.05-03-026). In the process of completing the first eight months of Phase 1 activities, SCE has determined there is no need for an Engineering Design Contractor, since it now appears that vendor products will be able to meet SCEs defined requirements. See id. at Settlement Agreement, Attachment A.

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A detailed review of 18 separate Use Cases, in which SCE identified those areas of its operations where various conceptual AMI features may be put to use to help reduce costs or otherwise improve overall operating efficiency; The System Engineering and Architectural Design of a conceptual architecture and associated reports defining SCEs AMI requirements; Cost trade-off analysis in conjunction with prioritizing identified system requirements; Use of the Technology Capabilities Maturity (TCM) methodology (described in Chapter III) for evaluating the ability of currently available metering products to meet SCEs identified AMI requirements; A market assessment of the metering and communication systems products available in todays marketplace; A Gap Analysis to identify the difference between currently available metering and communications products and SCEs requirements. This included a risk/reward analysis of proceeding with currently available products versus waiting for improvements that may likely become available in the near future; A market assessment of meter data management systems to determine whether there are existing systems to support SCEs AMI project; and Initiation and assessment of several metering and technology demonstrations. The results of these activities were then used to assess the feasibility of SCEs AMI concept, including the availability of vendor products to meet SCEs requirements, and to validate and update the assumptions SCE used in its directional cost/benefit analysis to gauge the overall financial feasibility of replacing SCEs current metering infrastructure with a modern, solid-state metering and communications system. At this stage, SCE has determined that its AMI solution is conceptually feasible, based on the following findings and conclusions: Advancements in meter and communications systems provide additional functionality resulting in significant increases in the operational benefits of AMI. SCEs revised assumptions relating to communication system coverage, remote connect/disconnect capability, reduced meter failure rates, increased demand response benefits and other previously unidentified benefits have moved SCEs cost benefit results in a positive

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direction from a net-present-value (NPV) of minus $490 million in the March 2005 analysis to plus NPV of $24 million in SCEs preliminary Phase 1 analysis. SCE believes next-generation commercial products will be available from vendors for testing and evaluation within the next six months based on responses from industry leading vendors. This report presents the conceptual design work, initial technical review and market assessment (including product demonstrations and review of financial aspects of acquiring AMI) that SCE has conducted to date. Specifically, in this report, SCE summarizes all of the Concept Definition deliverables, 9 as well as an initial technical assessment of the Meter Data Management System and evaluation of the Demand Response System. In addition, SCE presents updated demand response assumptions and a directional financial assessment of SCEs preferred strategy utilizing revised assumptions resulting from the Phase 1 activities completed to date.

The AMI technical and system requirements documentation is too voluminous for inclusion in this report. These documents have been made available on SCEs AMI website (http://www.sce.com/PowerandEnvironment/ami/TechDevelop) under Vendor Information.

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II.

FINANCIAL ASSESSMENT

In previous financial analyses filed with the Commission in January and March 2005, 10 SCE concluded that currently available metering and communication systems could not be expected to deliver sufficient operational and demand response benefits to offset the cost of implementing such systems. In August 2005, SCE demonstrated that certain key metering and communication technology improvements could conceptually result in a positive cash flow. 11 These anticipated improvements included: Improved communications capabilities, improved reliability, and an open communications protocol; Remote connect/disconnect capability; and Reduced meter failure rates.

The positive financial expectation was supported by SCEs directional AMI cost benefit analysis, in which SCE supplemented its best full-deployment business case analysis (Scenario 4) from the March 30, 2005 Application to reflect significant changes in assumptions based on the conceptual functionality improvements in AMI as they were envisioned at the time. The directional improvement in SCEs overall financial assessment of AMI remains positive as SCE heads into the second stage of Phase I. SCEs Market Assessment, discussed in Chapter III of this report, has confirmed that the anticipated improvements in certain key metering and communication technologies are likely to become available in the near future. In addition, SCEs rigorous Use Case process, described in Chapter III of this report, successfully identified several new areas of
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See SCEs Advanced Metering Infrastructure Revised Preliminary Business Case Analysis, filed January 12, 2005 in R. 02-06-001, and SCEs Testimony Supporting Application for Approval of Advanced Metering Infrastructure Deployment Strategy and Cost Recovery Mechanism, filed March 30, 2005 in A. 05-03-026. See SCEs Supplemental Testimony Supporting SCE Companys Application for Approval of Advanced Metering Infrastructure Deployment Strategy and Cost Recovery Mechanism, filed August 1, 2005 in A. 05-03-026, p.9.

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potential cost savings and benefits not included in the previous study. Thus, from the negative net present value (NPV) of $490 million demonstrated in the March 2005 analysis, SCE now shows a significant directional improvement resulting in a positive NPV estimate of $24 million. This Chapter addresses the bases for SCEs continued positive outlook regarding the financial feasibility of AMI as SCE proceeds with the remainder of Phase 1 of its AMI program. A. Financial Feasibility of SCEs AMI Solution Remains Directionally Positive Once SCE obtains firm bids for metering and communication systems that meet SCEs technical needs, SCE will be able to fully assess the financial feasibility of its AMI solution. In the interim, SCE has conducted a preliminary business case analysis, incorporating revised assumptions based on SCEs new AMI conceptual design. The results of this recent preliminary analysis have been compared to the previous analysis conducted in March 2005 to determine the magnitude and direction of the most significant changes. The March 2005 analysis was expressed in 2004 dollars, two years prior to the assumed deployment in 2006. By casting the current study in 2008 dollars, two years prior to the assumed deployment in 2010, SCE has effectively normalized the present value dollar differences that would arise simply from timing assumptions between the two studies. This allows SCE to isolate the actual cost or benefit changes and provides a reasonably accurate comparison. Though not definitive at this stage, the results of this updated preliminary analysis indicate the overall benefits are above the break-even point. By comparing the results of this latest analysis to SCEs earlier cost benefit analysis, SCE is able to estimate the directional improvement attributable to those areas where anticipated advancements in metering and communications technology are expected to either add net benefits or reduce costs.

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The system design process described in Chapter IV of this report identified not only the technical requirements, but explored the operational requirements and potential benefits that would accompany each of the identified uses for SCEs AMI system. The Use Case process provided a more comprehensive approach to identifying costs and benefits than the approach used in SCEs previous analysis. The earlier analysis was also constrained by a Commission mandated project schedule and certain demand response assumptions and limitations. By making some changes in the timing related to AMI deployment, SCE expects considerable savings to occur in certain logistical and personnel related transition costs. These savings are largely due to the ability to manage vendor product quality and deploy and enhance the Meter Data Management (MDM) system in advance of meter installations. While improvements in meter functionality and communication system coverage and reliability may add costs to the AMI infrastructure, these increases in cost are offset by the expected benefits to be derived through these functional improvements. Table II-1 summarizes the results of SCEs directional cost benefit analysis, showing the contribution of each operational area to the overall $514 million (in 2008 present value dollars) directional improvement over SCEs March 2005 analysis.

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Table II-1 AMI Directional Cost Benefit Analysis (Increased Benefits Compared to March 2005 Analysis)
Operational Area Incremental Improvement in Benefit or Cost (Millions of 2008 PV $) 45 298 33 315 70 (247) 514

Communication System Coverage Remote Connect/Disconnect Reduced Meter Failure Rates Demand Response Previously Unidentified Benefits 12 Meter & Telecomm. Cost Increase/Other Total Directional Improvement

These results are preliminary, order-of-magnitude estimates. The comparison must be viewed with considerable caution, not only due to the preliminary nature of the major cost elements (i.e., metering and communication system costs), but also because the time-frame reference points for the two studies being compared are separated by four years. Other differences between the two estimates, such as the study term and cost escalation over the four year differential of the study periods, have not been taken into consideration. Even given these cautionary considerations, SCE is confident that the more thorough financial analysis to be completed later will confirm the positive net present value of SCEs AMI solution going forward. The following sections describe in more detail the assumptions and specific findings attributable to each of the key technical improvements and program changes resulting from SCEs Phase 1 work to date.

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These benefits are discussed in Section II, A.5 below.

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1. Improvements in Communication System Coverage The initial technical review and market assessment of available AMI communications systems placed a high priority on coverage with the goal of reaching 100% of all meters all the time. This would be a significant improvement over the estimated 90% coverage assumed in previous cost-benefit analyses. SCE now believes that with a combination of communication technologies available on the market today, and anticipated improvements to become available soon, SCE will be able to approach the 100% goal. The capability of AMI to have multiple backhaul communications paths provides for improved reach, effectively including more meters in the automated polling communications network. This capability allows for additional reductions in field forces and associated personnel required to support manual meter reading activities in those areas where communications were either not available or intermittent. Telecommunication network costs are expected to increase to achieve the coverage and home-area network improvements. This increase is expected to be offset somewhat by the need for fewer servers and less data storage capacity than previously expected. Table II-2 lists the major benefit and cost changes expected to occur as a result of improved communication system capabilities.

Table II-2 Communication System Improvements (Compared to March 2005 Analysis)


Operational Area Incremental Change in Benefit or Cost (Millions of 2008 PV $) 89 (44) 45

Meter Reading and Field Services Telecomm Infrastructure Cost Total

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Improved communication system capabilities will also provide the ability to read meters on-demand which, when combined with the remote connect/disconnect feature (discussed below) will provide the means to facilitate Prepayment Services that are expected to increase service levels as well as improve cash flow and reduce writeoffs. Other benefits attributable to communication system improvements are due to the assumption of an open, non-proprietary standards based Home Area Network solution that will facilitate the ability of device manufacturers to develop products for the consumer market. These include but are not limited to in-home displays and PCTs. These improvements are expected to contribute to customer demand response to time-ofuse (TOU) and Critical Peak Pricing (CPP) rates as well as enhance and expand SCEs direct load control programs. Demand response and load control improvements are described further in Section 4 of this Chapter. 2. Remote Connect / Disconnect Capability Significant cost savings are expected to result from the ability to integrate a 200 Amp service disconnect switch into nearly all the residential solid state meters that can be operated through the AMI communications infrastructure. The cost of the service disconnect switch is significantly reduced based on product economies at large volumes represented by the approximate five million meter scale of the SCE system-wide deployment. The service disconnect capability will eliminate the need for field visits required to manually complete turn-on and turn-off orders and to disconnect and reconnect services for non-payment. Elimination of these field operations results in a $230 million reduction in field labor costs over the duration of the analysis period. Additionally, SCE expects this capability will eliminate the backlog for credit related disconnects, reducing write-off and improving cash flow. This capability will also enable

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new prepayment programs, which are expected to further improve cash flow and reduce write-offs. Table II-3 lists the major benefit and cost changes expected to occur as a result of the remote connect / disconnect capability.

Table II-3 Remote Connect / Disconnect Capability (Compared to March 2005 Analysis)
Operational Area Incremental Improvement in Benefit or Cost (Millions of 2008 PV $) 230 15 50 20 18 (35) 298

Field Order Cost Reduction Write-off / Billing Reduction Prepayment Services (Cash Flow) Prepayment Services (Write-off) Call Center Cost Reduction (Disconnect) Call Center Cost Increase (Prepay and Turn-on) Total

The automatic disconnect feature is expected to reduce operating costs by more than $300 million, this savings is partially offset by the $35 million estimated increase in call center costs due to customer verification prior to automatically connecting or re-connecting service. 3. Deployment Schedule Changes and Reduced Meter Failure Rates The stringent deployment schedule previously assumed for AMI required a less than nine-month ramp-up for installation of the metering and communications infrastructures and meter data management system. This created a potential for significant quality issues and systems integration issues for the AMI deployment similar to that SCE experienced several years ago with the rapid deployment of the real time energy metering (RTEM) project for large commercial and industrial customers. The

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likelihood of this was further compounded by the fact that all three California investorowed utilities were planning on simultaneous deployments. Previous analyses assumed meter failure rates as high as 25 percent over the duration of the AMI system life. By incorporating a more stringent quality assurance and controls program in addition to vendor contractual obligations, SCE expects to reduce the expected meter failure rate by at least 50 percent. The result will be significantly lower meter replacement costs, reduced trouble-report field tests, and reduced exception billing costs. Non-quantifiable customer benefits will also result from the elimination of estimated bills that inevitably result from meter failures. These costs are summarized in Table II-4.

Table II-4 Reduced Meter Failure Rates (Compared to March 2005 Analysis)
Operational Area Incremental Improvement in Benefit or Cost (Millions of 2008 PV $) 23 10 33

Meter Procurement Cost Savings Meter Replacement (Labor) Total

4. Demand Response Results Improved by Changes in Program Assumptions As discussed in Chapter IV System Design, the AMI system is expected to be capable of interfacing with in-home and around-the-home premise units (including in-home display devices), resulting in better usage and cost information being provided to customers. This improved information is expected to enhance customer acceptance of and response to new tariffs and direct load control programs while reducing the cost of customer communications.

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SCE believes AMI can enable a significant summer peak load reduction through various pricing and load control programs. In October 2004 and January 2005, SCE analyzed the impact of numerous rate scenarios as mandated by the Commission in R. 02-06-001. 13 The approach herein explores an alternative set of assumptions that provide significant benefits that improve the directionally positive outcome of the AMI financial assessment. As explained later in this Chapter, SCE now assumes a TOU default rate with 57.6% participation and a CPP option with 11.5% participation, rather than the 10% participation in TOU and 80% participation in CPP assumed in the March 2005 analysis. In addition, in SCEs March 2005 filing best case, SCE did not include the benefits of load control programs or the benefits of capital avoidance related to upgrades to existing distribution related facilities. In this analysis, SCE includes three load control options for residential customers and the benefits of sub-transmission and distribution related capital avoidance for all demand response tariffs and programs. This approach results in a net demand response benefit of $481 million compared to the previous estimate of $166 million. 14 This is an improvement of about $315 million (in 2008 PV dollars). A large portion of the improvement is attributed to the elimination of most of the marketing costs in the March 2005 analysis of $220 million thought to have been needed to sustain the previously assumed 80% participation level in CPP tariffs. The results of SCEs updated analysis of demand response programs are summarized in Table II-5.

13

14

See Administrative Law Judge and Assigned Commissioners Ruling Adopting a Business Case Analysis Framework for Advanced Metering Infrastructure, issued 7/21/2004 in R.02-06-001, setting forth assumptions for various AMI deployment scenarios. The demand response benefit of Scenario 4 was about $386 million. The net benefit of that approach was $386 million minus $220 million in marketing and enrollment costs or $166 million.

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Table II-5 Demand Response Benefit Changes (Compared to March 2005 Analysis)
Incremental Changes in Net Benefits (Millions of 2008 PV $) 180 56 53 26 315

Tariffs and Programs Price Response (TOU & CPP) Title 24 PCT Air Conditioning Cycling Smart Thermostat Total Improvement from 2005 5. Previously Unidentified Benefits

SCEs Phase 1 System Design Process has extended the potential applications of AMI to a broader range of functions, resulting in the identification of several areas of potential cost savings that were not identified in earlier studies. SCEs Transmission and Distribution Business Unit (TDBU) expects to gain approximately $27 million in benefits, attributable to transformer overload prevention and reduced nopower field calls. SCEs Billing Organization is estimating $8 million in billing related benefits due to a reduction in billing exceptions. A $12 million reduction in field services and meter reader workers compensation costs has also been identified. An additional $23 million benefit is attributable to cash flow improvement resulting from elimination of the billing-lag associated with summary billing accounts. In previous studies, it was assumed that SCEs existing Transformer Load Management (TLM) program would not be improved upon through an AMI deployment. New assumptions relating to distribution system monitoring capabilities of AMI have resulted in revised assumptions relating to the prevention of transformer overloads and the resulting elimination of premium-time emergency responses to system outages. Additional cost reductions have been identified for avoidance of dispatching distribution crews to respond to no-power customer calls. Based on technology improvements,

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SCE assumes such calls can be resolved by the call center using the AMI system to confirm that power is actually on when the problem is on the customer side of the meter (usually attributable to the main breaker being turned off). These previously unidentified benefits are summarized in Table II-6.

Table II-6 Previously Unidentified Changes (Compared to March 2005 Analysis)


Incremental Changes in Benefit or Cost (Millions of 2008 PV $) 16 11 8 23 12 70

Operational Area Transformer Overload Prevention Reduced No Power Field Visits Billing Exception Processing Reduction Summary Billing Lag Meter Reader and Field Service Workers Comp. Reduction Total Improvement from 2005

6. Benefits and Other Financial Aspects Under Evaluation SCE is continuing to explore several benefits resulting from the deployment of the AMI that: a) create benefits for customers but that do not result in cash flow benefits, such as theft deterrence; b) create societal benefits; and c) provide new business opportunities that may result from services such as automated contract meter reading of gas and/or water meters for other utilities. SCE is planning to address these aspects completely in its final business case. SCE is also monitoring the potential for a federal tax credit for smart metering that is under consideration in the federal energy bill currently in development, which could have a significant impact on the financial assessment of AMI.

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B.

SCEs Phase 1 System Design Demand Response Assumptions and Considerations 1. Demand Response Overview The principal focus for the AMI system is to empower customers to

manage their energy costs. As such, demand response is the clear driver of five of the six minimum functionality requirements previously identified by the Commission for AMI deployment. 15 Those functionality requirements relate to how price response, load control and pricing information may help customers reduce energy consumption and/or demand. AMI-enabled demand response is a critical element to meeting the states energy policy goals as well as to the assessment of benefits of the AMI program. SCE estimated the benefits of demand response in its prior AMI filing; however, there are significant changes in the assumptions and approach currently being used to estimate this critical component of AMI. This section updates SCEs assumptions and various other considerations relating to pricing and direct load control options that are essential to a comprehensive evaluation of the conceptual feasibility of AMI. There are many ways to create demand response, including timedifferentiated tariffs and load control programs. Residential air conditioning is the largest source of discretionary peak electricity usage in Southern California, and AMI enables various ways to accomplish load reductions that can yield generation supply and distribution benefits. AMI will enable time-differentiated pricing for SCEs residential and small commercial customers and facilitate automated load control of air conditioning. Because many issues related to dynamic pricing and direct load control remain undecided

15

See Joint Assigned Commissioner and Administrative Law Judges Ruling Providing Guidance for the Advanced Metering Infrastructure Business Case Analysis, issued February 19, 2004 in R.02-06-001, pp. 3 & 4.

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at this time, the assumptions and analysis of demand response contained in this report should be viewed as an update rather than a final or optimal approach. SCE currently estimates that demand response enabled by AMI can yield total benefits of about $481 million in 2008 present value dollars. a) Regulatory Considerations and Avoided Cost There have been three key developments that helped shape the current analysis. First, the California Energy Commissions (CEC) Title 24 building code initiative for Programmable Communicating Thermostats (PCTs) has allowed SCE to define an opportunity for AMI to enable reliable demand response benefits with a targeted PCT program. Second, the Commission approved SCEs proposal to install an additional 180,000 load control devices under its air conditioning cycling program during 2006 to 2008. AMI can enable a new approach to load control with these devices to yield reliable peak shaving. This can provide additional sub-transmission and distribution related capital deferral benefits over the existing air conditioning cycling program. Third, assumptions for future avoided capacity and energy costs have escalated since the Commissions suggested assumptions for these parameters in July 2004. 16 b) Tariff and Program Design Considerations As the AMI system requirements and capabilities evolve through the remainder of Phase 1, SCE will continue to work toward a final approach to AMIenabled demand response. There are many rate design approaches and load control programs that can accomplish cost-effective peak load reductions. The approach herein offers a reasonable estimate of demand response benefits. SCE anticipates that further

16

See Appendix A of Administrative Law Judge and Assigned Commissioners Ruling Adopting a Business Case Analysis Framework for Advanced Metering Infrastructure, issued July 21, 2004, in R.02-06-001.

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analyses of tariff and program approaches may yield load reductions in ways that are more cost-effective if greater emphasis is placed on rate designs and pay for performance. For example, load control programs could be modified to pay for performance, measured by the AMI system, rather than by seasonal or credit payments. Moreover, load control program participants could be placed on CPP rates in lieu of receiving incentive payments. SCE could use smart thermostats or cycling devices as enabling technology for load reductions in response to CPP rates. Also, SCE could place all customers on TOU rates compliant with Section 80110 of the California Water Code enacted by Assembly Bill (AB) 1-X, or enroll them on a voluntary basis in TOU or CPP rates. SCE has followed the progress of the AMI applications of SDG&E and PG&E and will be looking for guidance from the Commissions approval of various demand response parameters and assumptions. An important element of rate design in the AMI business case analyses is how compliance with AB1-X is interpreted by the Commission. Since AB1-X affects rates on consumption at 130 percent of residential baseline and below, a significant portion of consumed energy is shielded from price signals. At this time, in accordance with the Commissions guidance in R.02-06-001, SCE has not taken into account the effects of AB1-X. However, SCE is aware that the Commission approved PG&Es AMI deployment application, which relied on voluntary enrollment in TOU and CPP rates. SCE is also following the development with SDG&Es AMI deployment application for ABI-X compliant tariffs. The following subsections describe SCEs assumptions pertaining to demand response and the resulting load reduction impacts and benefits. The benefits include avoided capacity and energy purchases and deferred spending on distribution related capacity.

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2. Key Assumptions to Demand Response Benefits Analyses Overarching assumptions in the analysis of Demand Response benefits include: All customers below 200kW will be equipped with an AMI meter per the deployment schedule. Residential meters will provide at least hourly interval data. Commercial and industrial customer meters will provide 15 minute interval data. Two-way communications with the meter and any associated PCTs will be enabled.

Procurement benefits include avoided capacity and avoided energy. Avoided capacity benefits include the value of capacity provided by a particular tariff or load control program. The value of capacity is based on the cost of an avoided combustion turbine (CT) as a proxy. The CT proxy value assumed is $80.10/kW in 2006 and escalated each year. The value of peak reductions from a CPP tariff is adjusted (de-rated) because of the limitation of an assumed number of CPP events per summer season, compared to a combustion turbine, which is available near 100 percent throughout the year. The value of load control programs is also de-rated for similar limitations. The assumption for avoided peak energy value is $98.80/MWh in 2006 and escalated each year for energy avoided during a CPP event. 17 These avoided procurement cost assumptions are higher than what was assumed in SCEs March 2005 filing, reflecting increases in both the construction costs of a CT and a significant escalation in the cost of natural gas. 3. Approach to Estimating Demand Response Benefits SCE used a portfolio approach to achieving demand response for several reasons. First, SCE has a successful residential air conditioning load control program and
17

SCE has not included the cost of congestion associated with transmission of peak energy at this time.

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is in the process of roughly doubling enrollment in that program. Those customers are important to achieving demand response goals because they are willing to have their air conditioning loads curtailed. Other utilities with successful load control programs, such as Florida Power and Light, Xcel Energy and Progress Energy, have enrolled more than 25 percent of their residential customers on load control programs. 18 SCE believes that a similar level of enrollment is possible in its service territory. Second, the CEC is pursuing Title 24 -Building Code changes requiring PCTs for residential new construction and residential HVAC retrofits. SCE assumes that these PCTs would be available for a load control program. Moreover, the PCTs developed from standards in Title 24 would likely become available for customers generally. SCE could promote a load control program using PCTs compliant with Title 24. The devices would be activated and controlled via the AMI infrastructure. Third, SCE expects many customers would prefer TOU and CPP rates. There are various rate alternatives that could be offered to customers including mandatory TOU or CPP for Tiers 3, 4 and 5 only (Tiers 1 and 2 would comply with AB1X); default TOU or CPP with opt out to other choices; or simply voluntary enrollments in TOU or CPP. There is also a range of rate designs that could be applied. For the purpose of this report, SCE has updated its March 2005 and August 2005 rate approaches. In the remainder of Phase 1, SCE will undertake additional study that will consider future Commission rulings on AMI rate designs. SCEs approach to estimating demand response benefits for this study is provided below in two categories, time differentiated tariffs and load control programs.

18

SCEs 2004 Long-Term Procurement Plan Testimony served in R.04-04-003, Volume 1, p. 115, Table V - 18.

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a)

Time Differentiated Tariffs For the purpose of analyzing the conceptual feasibility of AMI,

SCE assumes that the Commission will authorize SCE to implement time-differentiated pricing in the form of TOU and CPP rates. When an AMI meter is installed, the customer will be defaulted to a TOU rate and will be offered a choice to opt-out to a CPP rate or a tiered-rate structure. SCE relied on the results of the Statewide Pricing Pilot (SPP) studies to estimate the percent enrollment of customers on rate choices by customer class as well as the load reduction amounts. SCE also used the rate designs and bill impacts for TOU and CPP developed for its March 2005 AMI application (A.05-03026) and the Momentum Market Intelligence model for estimating customer enrollments based on projected bill savings. The estimates for sustained enrollment by rate offering for all classes are 57.6 percent TOU, 11.5 percent CPP and 30.9 percent tiered (current rate schedules). 19 This approach differs from SCEs best-case March 2005 AMI application, which used 80% CPP, 10% TOU and 10% tiered rates for all classes below 200kW. SCE used the same methodology to calculate price related demand response as that used in its March 2005 AMI application. This approach relies on the SPP studies findings on price elasticity and customer responsiveness to timedifferentiated rates. The resulting estimated peak load reductions by rate in 2015, after full deployment, are shown in Table II-7.

19

Commission required assumptions used in SCEs March 2005 AMI Application included default rates that were not AB1-X compliant. This analysis continues to rely on those assumptions.

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Table II-7 Estimated Peak Load Reduction in 2015 for TOU and CPP Rates (All Classes)
Rate TOU CPP Total TOU & CPP Meters Enrolled 3,160,400 628,900 3,789,300 MW Savings 188 181 369

b)

Load Control Programs SCEs approach to calculating demand response benefits assumes

that the AMI system will enable the economic dispatch of load control that will provide procurement cost reductions and deferral of distribution related spending by shaving the system peak. The AMI system will enable two-way communications with devices such as PCTs to enable the dispatch of command signals, provide information about event status and allow event override. Such features can enhance the appeal of load control and increase customer enrollment in programs. SCE assumed that load control can be provided in three types of air conditioning peak saver programs: Title 24 PCTs, Economic Dispatch of A/C Cycling, and the Residential Smart Thermostat Program. These programs are described in the following sections. SCEs current approach covers the residential class only. The recent SPP report for 2004 and 2005 20 indicates that significant load reductions could be achieved with enabling technology in the commercial and industrial classes as well. SCE will consider load control programs for the commercial and industrial classes in the remainder of Phase 1. The estimated enrollments and MW savings in 2015 for these three load control programs above are shown in Table II-8.

20

CRA International. Californias Statewide Pricing Pilot: Commercial and Industrial Analysis Update, May 30, 2006.

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Table II-8 Estimated Peak Load Reduction in 2015 for Load Control Programs Residential Class Only 21
Program Title 24 Smart Thermostat Air Conditioning (A/C) Cycling Smart Thermostat Total Load Control Meters Enrolled 133,636 321,720 226,198 681,554 MW Savings 120 524 196 840

1)

Residential Title 24 Programmable Communicating Thermostats (PCTs) Beginning in 2009, when the new California Building

Code is effective, SCE assumes that 25% of customers with PCTs (residential new construction and a portion of residential retrofit construction) and AMI meters will enroll in an SCE load-control program. Under the program, customers would be paid an incentive of $25 per summer. The PCTs on the program would provide air conditioner compressor curtailment during peak by increasing the thermostat set point for short durations but frequent dispatches. This program would provide procurement savings and distribution related capital spending deferral benefits. SCE used 1 kW/hour load reduction for a four-degree thermostat temperature setback for customers on the load control program, which has been demonstrated empirically by SCE and other utilities. 2) Economic Dispatch of Existing Residential Air Conditioning Cycling Program SCE expects to have approximately 340,000 customers enrolled in its Summer Discount (Air Conditioner Cycling) Plan by 2009. The current
21

MW savings are calculated mid-year but meters enrolled are end of year.

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program is dispatched for reliability purposes only. With AMI, SCE will be able to more accurately estimate available load curtailment potential of customers on the program. Thus, SCE will be able to use the cycling devices for economic dispatch of the program where air conditioner compressors would be curtailed for short durations but on a frequent basis throughout the summer thereby shaving the system peak load. Because procurement benefits already exist, they are not considered incremental to AMI. Although AMI may enhance procurement benefits because of economic dispatch, SCE has not included additional procurement benefits at this time. SCE includes only the incremental sub-transmission and distribution capital spending deferral benefits for this program. SCE used 1.6 kW/hour load reduction for customers on the Air Conditioning Cycling program, which has been demonstrated empirically by SCE. 3) Residential Smart Thermostat Program SCE believes that it can reasonably enroll about 25 percent of residential customers with central air conditioning either on its existing Air Conditioner Cycling program, or a new Smart Thermostat program involving Title 24 compliant thermostats. To reach this market penetration of customers not already on the two programs mentioned above, SCE assumes another 250,000 customers could be enrolled on a Smart Thermostat program, and that SCE would pay for the cost of thermostats and incentives. Residential incentives are assumed at $25 per summer. For this program, there are procurement savings benefits and distribution related capital spending deferral benefits. SCE used 1 kW/hour load reduction for a 4 degree thermostat temperature setback for customers on the load control program. 4. Analysis of Demand Response Benefits Demand response benefits accrue from discretionary load reductions by customers. AMI enables the price signals, provides a means of two-way communications

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to make load control more effective and convenient, and assures a means for the accurate and reliable measurement of load reduction capability. There are various ways to accomplish load reductions. The analysis of demand response benefits offers one approach that yields $481 million in present value net benefits (2008 PV $). Other approaches are possible and SCE intends to further refine its plans for time-differentiated rates and load control that optimize enrollment, load reductions and net benefits to customers. SCEs demand response approach assumes that by 2015, about 24 percent of customers would be enrolled in either CPP rates or a load control program. In total, it is assumed that about 75 percent of customers would participate in some form of time differentiated rate or load control program. Distribution related capital deferral related to avoidance of upgrades to existing facilities enabled by AMI provides a significant cash flow benefit to SCE. SCE assumed that 30 percent of the projected distribution capital growth related to existing infrastructure could be deferred due to the AMI projected MW peak load reductions. The remaining 70 percent of sub-transmission and distribution required capital growth related to existing facilities is unavoidable because of necessary upgrades. The deferred capital spending is based on a 10-year average of estimated sub-transmission and distribution capital costs or $463,430 per MW. Procurement benefits vary by tariff and load control program depending on tariff/program-specific attributes of how often the demand reduction can take place and whether the load reduction is firm or predictable. The avoided procurement capacity and energy benefit assumptions by program are shown in Table II-9.

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Table II-9
Assumptions for Avoided Procurement Costs (Nominal $2006) Program TOU CPP Title 24 PCT Air Conditioning Cycling Smart Thermostat Avoided Capacity ($/kW) 92.12 56.07 48.86 N/A 48.86 Avoided Peak Energy ($/MWh) 91.80 91.80 91.80 N/A 91.80 Avoided Off Peak Energy ($/MWh) 73.20 73.20 73.20 N/A 73.20

Demand response tariffs and programs involve certain implementation and operational costs. These costs include program or tariff marketing, CPP event notification, increased call handling costs, load control equipment and installation costs, program incentive costs and program administration costs. Demand response benefits, net of these program related costs are summarized in Table II-10. Procurement benefits and incentive costs relating to the Air Conditioning Cycling program are not included in this table because they already exist and are not incrementally attributable to the AMI project.

Table II-10
Net Demand Response Tariff and Load Control Program Benefits (Millions of 2008 PV $) Program Procurement Benefits 227 113 83 Distribution Related Capital Deferral Benefits 22 21 25 Program Incentives and Costs 9 27 53 Net Benefits 239 107 56 53

TOU Rate CPP Rate Title 24 PCT Air Conditioning Cycling Smart Thermostat Total

91 $514

53 87 23 143 $176 26 $481

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III. A.

MARKET ASSESSMENT

Approach to Market Assessment 1. Overview This Chapter presents the results of SCEs Market Assessment, which is

one of the Phase 1 deliverables. The market assessment involved an evaluation of whether any currently available products and systems are likely to evolve in a way that would meet SCEs AMI requirements. In addition, this Chapter provides an assessment of the Meter Data Management System (MDMS) vendors, describes various technology demonstrations that are underway, and provides an overview of other utility experience with AMI systems. As described in Chapter IV, SCE is using a comprehensive process to define the meter and communications system requirements for its AMI solution and to determine the level of engineering design and development work required to meet those requirements. The market assessment is a necessary step in that process, providing closure on the buy or design decision related to acquiring a viable AMI solution. SCEs overall market assessment strategy goes beyond a simple evaluation of what is currently available in the marketplace. To realize its AMI design concept, SCEs vision of the potential for additional technology capabilities in future AMI products will need to be endorsed by both the vendor community and other potential purchasers of AMI products and systems. The vendor collaboration approach described in this Chapter uses the system engineering framework described in Chapter IV to influence the development of a new generation of AMI meters by leveraging the experience and knowledge of the vendor community, while minimizing SCEs own development costs. The open innovation process that was outlined by SCE to the vendor community closely resembles a process that is used by many leading firms in industry

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today. This process was most recently described for Proctor and Gambles own Connect and Develop strategy, which has proven to be very successful in leveraging its research and development resources. 22 SCE cannot expect vendors to develop new AMI systems solely in response to SCEs requirements, so SCE has adjusted its own requirements, where necessary, so SCEs requirements are more compatible with SCEs perception of the needs of others in the utility industry. SCE believes technology vendors will be far more responsive to SCEs requirements if other major utilities and utility regulators have similar needs and requirements. As a result of our participation in AMI user groups, SCE has learned that many other utilities have similar needs and requirements, and that the vendor community is responding by developing new products and services to address utility needs. 2. Stakeholder and Industry Acceptance SCE also recognizes the risk that accompanies use of a custom engineering design that is different from the design eventually adopted by the rest of the utility industry. If the AMI products and services obtained by SCE are inconsistent with the AMI technology adopted and used by most of the utility industry, then SCE would face the risks associated with having something that is one of a kind. With a one of a kind product, there is the potential for increasing life-cycle costs due to maintenance, replacements and repair that would not exist if SCEs design were more in line with what is likely to become the industry standard. To address this risk, SCE supports efforts by the entire utility industry (i.e., vendors serving the utility industry, utilities and utility regulators) to identify basic requirements that are common to most utilities. Through the process of open
22

Connect and Develop: Inside Proctor and Gambles New Model for Innovation, Harvard Business Review, Huston, Larry and Sakkab, Nabil, March 2006.

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collaboration in technology innovation, these stakeholders can provide input and ideas on design concepts so they can be evaluated during the process rather than after most of the design work is complete. The open collaboration approach is not intended to discourage development of niche products, which may be of value and use to utilities, but to affirmatively encourage development of products and services that have broad utility appeal by meeting not only SCEs basic requirements but the basic requirements of many other utilities as well. SCE has kept other interested parties apprised of its desire to encourage development of products and services that meet basic utility needs through active participation in OpenAMI, 23 UtilityAMI, 24 and AMI MDM. 25 Through this OpenAMI process, AMI concepts and architectures are continually evolving and being refined. SCEs active participation in OpenAMI has been acknowledged by the industry. This is evidenced in the minutes of the UtilityAMI meeting of April 25, 2006. One key factor cited as changing the focus of OpenAMI is: The pending submission of Use Case and requirements work from SCE. By applying hundreds of person-hours of labor, SCE has produced in a short time much of the work that OpenAMI had hoped to accomplish in developing requirements through Use Cases. The requirements may end up being less generic than if OpenAMI had developed them independently, but they still represent a huge step forward. 26

23

OpenAMI is a collaborative initiative consisting of utilities, vendors, consultants, and other industry stakeholders. 24 UtilityAMI is an advisory group to OpenAMI. 25 AMI-MDM provides a network for discussing issues related to Meter Data Management System adoption and implementation. Membership in the group includes utilities, vendors, regulators, ISOs, consumer advocates and others interested in Advanced Metering, Demand Response and Meter Data Management. 26 Minutes of UtilityAMI Meeting, April 25, 2006, pp.3-4

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B.

Meter and Communications Market Assessment 1. Objectives The purpose of performing the AMI vendor and technology market

assessment was to gauge next generation product availability and viability as it relates to SCEs AMI system requirements. The goal was to develop a level of confidence that more than one commercial option for AMI meters would be available containing the necessary features to justify costs for broad scale deployment. A rigorous process was used involving multiple steps and activities designed to influence the direction and timing of vendor AMI product development work. Through this collaborative process, SCE has proactively involved leading manufacturers of Advanced Metering Reading (AMR) and/or AMI technologies through formal and informal settings where ongoing dialogue focused on product enhancements and desired system functionality that could prove beneficial not only for supporting SCEs business case, but also to serve as a platform that could potentially meet the needs of other North American utilities. Two important questions needed to be answered to accomplish SCEs market assessment objectives: 1. Whether SCE would need to buy or design an advanced metering solution; and 2. Whether the metering and telecommunications products containing the right features and possessing the necessary functionality would be available in a timely fashion. SCE has no intention of entering into the meter manufacturing business, thus the success of its AMI development program relies on strong vendor support. SCE continues its discussions with the vendor community, attempting to share its vision relating the additional benefits to be derived from incorporation of advanced features, most of which were not previously available.

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2. Product Segmentation From the very beginning, SCE has expressed a desire for vendors to pursue interoperability (between meter and communications solution providers) and to use non-proprietary standards-based on Home-Area-Network solutions. SCEs goal is to have multiple meter manufacturers working with multiple communications vendors to ensure metering products can be integrated to accept various communications modules. And conversely, for communications vendors to work with multiple meter manufacturers to ensure their communications modules can be adapted to multiple solid state residential metering platforms. This approach is illustrated in Figure III-1 below. Among other benefits, vendor interoperability would provide for much greater technology choice for customers. Using a non-proprietary standard based HomeArea-Network solution for the AMI system would also prevent vendor lock-in and facilitate the ability of device manufacturers to develop many products for the consumer market. SCE recognizes that a growing market for energy smart devices will be important to enable customers to manage their energy costs. These include smart communicating thermostats, in-home displays, smart lighting control systems, and smart major appliances.

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Figure III-1 SCE Market Segmentation Approach


1. Meter 2. Communications 3. In-Home Devices

In-Home Display Devices


Local Area Network Wide Area Network Interface Home Area Network Interface (HAN) Full Two-way Upgradeability Multiple integrated WAN options Minimal network Administration Self registry capabilities Reliability 3X3 Security

Usage / Cost Profiling Messaging

Lighting Controls

Electronic Ballast Wall Switches Area lighting

PQ Metrics Integrated Disconnect Integrated Intelligence Enhanced Memory >15 Year MTTF

Load Switches

A/C Compressor Pool pump Outlet device Intelligent Circuit Breakers

Smart T-stat

Display Confirmation Data capabilities Etc

With these issues in mind, SCE began to view AMI as involving three separate parts that would need to work together: (i) meters (sometimes referred to as metrology); (ii) communications and supporting network infrastructure; and (iii) networked devices in the home. The goal was to encourage interoperability by encouraging mixing-and-matching. This approach was intended to replace the historical meter selection by default approach to meter procurement typically associated with AMR system acquisitions. 3. Product Supplier Research As a starting point in getting the vendor community more actively engaged, SCE needed to identify the universe of vendors providing AMR/AMI solutions to the marketplace. SCE performed detailed research and used public information and fee based reports and services to identify an initial pool of potential vendors for AMI related products or services. The next step in the process involved obtaining a better

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understanding of the potential vendors technology development efforts and how these efforts related to the conceptual capabilities desired in a next generation solution. To achieve this, SCE developed a Market Survey and distributed it in December 2005 to over 100 potential vendors. This included all the North American and International AMR/AMI product suppliers that had been identified as a result of the earlier work. 4. Status of Next Generation AMI Technology Development SCE received encouraging feedback as reflected by the significant response rate to the Market Survey, the level and extent of product development activities among vendors, and the apparent alignment with core feature integration between meter and communication vendors. SCE was also encouraged by the indicated development time-lines and the quoted target product prices. SCE found that significant technology advancements are underway as compared to what was found to be commercially available in the market only 12 months earlier. The information obtained through the survey instrument served as a first screen to better identify active industry players. Telephone interview sessions were scheduled and conducted with respondent vendors. Discussions focused on the response received to the Market Survey and explored core aspects of component level features. The interviews provided SCE with a better understanding of each vendors AMI technology roadmap and the level of corporate and senior management commitment to their product development efforts and revealed some significant differences between potential vendors. The process served to identify a sub-set of vendors that appeared to be further along in development of products and services that would meet SCEs AMI requirements. The interviews also served to identify future due diligence activities that would need to be undertaken

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5. Framing Conceptual Capabilities TCM Model Following the telephone interview sessions, SCE evaluated the information it had collected and determined that it needed to merge internally generated system capability requirements those developed through the Use Case process (see Chapter IV) -with the realities of external, near-term product development activity. This was deemed necessary to help shape a set of realistic system and architecture requirements for SCE. The result was development of a Technology Capability Maturity (TCM) Model. This model is a tool that better describes the meter and the communications elements of an AMI solution. The tool is structured in a matrix format and provides descriptive elements of various architectural and component level features. The matrix serves to ensure uniform comparisons of metering and/or communication system capabilities while capturing data in a format to assist with gauging near term market development activities. The metering and communications TCM models are described more thoroughly in Chapter IV of this report, and are included as Appendices C and D respectively. 6. Ongoing Development Efforts Once the TCM framework was complete, it was again important to obtain feedback from the vendor community. The vendor community was invited to one of two teleconference sessions conducted to explain the TCM and SCEs intended approach. Following these briefing sessions, SCE conducted a survey using the TCM model. Responses received confirmed various levels of technical maturity in the product development process. The results also revealed that development activity was moving towards products that would likely meet SCEs needs.

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7. Component/Product Testing and Risk Assessment Based on the information gathered to date, SCE has identified important work that still needs to be accomplished in the remainder of Phase 1. This work includes: 1. Ensuring that candidate AMI products will be available within quoted time-frames for testing; 2. Component level / Functionality testing - SCE will need to perform lab testing of key metrology and communication solution components, along with limited testing of product functionality; 3. Meter and Communications product testing - SCE will need to test precommercial and commercial products to ensure that the AMI metering and communications elements meet SCEs requirements and successfully pass select lab testing routines; 4. Integrated Product Testing - SCE will need to perform lab testing on pre-commercial and commercial products containing the desired matching of the metrology platform with the communications module to ensure the fully integrated solution is tested and successfully passes SCE rigorous lab testing environments; 5. Performing risk assessment activities as it relates to evaluating various potential AMI product suppliers strengths, processes and technologies; and 6. Leveraging, incorporating, and re-testing product enhancement features that may be developed during the late 2007 time-frame. In addition, near term activities will focus on determining on whether promising meters can work with promising communication module products (as they are prescribed by various network architectures) as part of an integrated AMI solution. SCE is also currently involved in an extensive Local Area Network / Wide-Area Network engineering analysis to evaluate bandwidth, capability, and other criteria that would allow SCE to determine which technology solutions are likely to best meet SCEs AMI goals. These efforts are likely to be helped as it becomes more apparent that the ZigBee standard will likely be the industrys leading choice for Home Area Network communications protocol for residential applications (see Chapter IV). Because this is an open (i.e., non-proprietary) protocol, SCE believes use of this protocol will spur the

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development of Title 24 compliant PCTs and energy information displays. Getting devices built and available for testing by SCE in advance of or concurrent with Phase 2 field testing will be beneficial SCEs assessment of customer participation in and response to TOU and CPP rates and direct load control programs. 8. Market Assessment Key Findings The market assessment was an important and necessary undertaking to help answer key questions related to SCEs pursuit of viable technology alternatives. The information obtained reveals that significant technology development activities are underway with a large number of industry suppliers. It further reveals that many of the important features and characteristics that will improve SCEs economic justification for wide-scale AMI deployment, such as integrating a service disconnect switch, will be included in the next generation of AMI products and services. SCEs plan to pursue next generation AMI technology as described above appears supported by the following key findings: Many AMI vendors are developing next generation technologies that appear to closely align with SCE conceptual capabilities and system requirements; Estimated prices for the next generation technology appear, for the most part, to be within expected ranges; Significant cost reductions have been achieved in integrating a connect / disconnect device with a residential solid state meter; All of the largest North American meter manufacturers and some international manufacturers are developing next generation metering technology integrating the disconnect / current limiting devices; and Products will be available for SCE acceptance testing in 2006.

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C.

Meter Data Management System (MDMS) Market Survey 1. Role of Meter Data Management in AMI The Meter Data Management System (MDMS or MDM System) will

serve as the system of record for all metered data and will play a central and crucial role in creating and capturing the key benefits from AMI. Data gathered, processed, and made available from AMI via the MDMS will provide near real-time intelligence in many of SCEs utility operations. SCE has adapted the functionality map shown in Figure III-2 from Accenture to serve as a representation of the MDMS Conceptual Design. The diagram illustrates the SCE business functions (as defined through the AMI Use Cases) that interface directly with meter data. The outer circle illustrates other SCE applications for each of the business areas that will be integrated with the MDMS.

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Figure III-2 MDM System Functionality

A meter data repository of processed and raw data is accessible to users in eight business areas and interfaces with other SCE applications, which are also able to communicate with SCEs advanced meters through the MDM System. Traditionally, meter data has been used primarily to generate bills and facilitate current demand response programs. As the illustration shows, the functions of the MDMS will provide a substantial expansion of the uses for meter data. The MDMS will enable many other functions to access data and use it to improve SCEs business operations. 2. MDMS Market Research and Survey SCE has researched the availability of MDMS vendors and packaged software during this first phase of the AMI project. This effort has led to some key

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discoveries and direction for developing a MDM System. SCE also joined AMI-MDM in early 2006. SCEs engaged Accenture to conduct a formal market survey of meter data management software packages. The purpose of this survey was to assist SCE in understanding the scope of currently available MDMS solutions, developing a framework for evaluating solution options, and evaluating these options against the framework. The market survey investigated seven leading MDMS vendors, and evaluated each using the 12 criteria listed here: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Functional Fit Scalability Flexibility/Configurability Solution Direction Technical Solution Direction Functional Ease of Integration Ease of Use/Access to Data Vendor Business Risk Proven Track Record Organizational Impact Total Cost of Ownership Speed to Implement

To evaluate how well vendors products aligned with SCEs business requirements, Accenture utilized the Functionality Map (see Figure III-2 above). The market survey provided SCE an analysis of how well each MDMS vendors product matched SCEs expected business functions under the AMI program. The analysis looked at the functionality, costs, risks, implementation time, development time, and license fees, and concluded that the most effective approach is to acquire a Commercial Off-the-Shelf (COTS) software package.

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It was further identified that while existing products do not yet meet all of SCEs requirements, the leading MDM Systems could be enhanced to provide the functionality required in time to support the AMI program deployment. Discussions with MDMS vendors confirms this conclusion, and SCE will further test this assumption through validation responses to the MDMS Request For Information (RFI) release in June and selected product testing in the remainder of Phase 1. 3. MDMS Business Requirements SCE has done extensive work during Phase 1 to develop business requirements for the MDM System. The 18 Use Cases to be described in Chapter IV of this report provided a base foundation for defining these requirements. Further work has been done to develop business requirements and define the requirements for the process of validating, editing and estimating (VEE) billing data. The requirements for accurately processing 720 data points for each residential customer (24 hours/day x 30 days) will need to be significantly more detailed than the process that currently validates only one data point per residential customer each month. SCE has developed and published a preliminary set of requirements for MDMS in conjunction with the RFI. SCE expects to complete work to define the detailed VEE requirements, which will be included with a full set of business requirements for the system functionality in a MDMS Request for Proposal (RFP) to be issued by SCE in the fourth quarter of 2006. D. Technology Demonstrations Product demonstrations are an important component of SCEs market assessment. These demonstrations include the following. 1. SCE recently completed a 6-month pilot test of narrowband power line communications, 27 which tested remote, on-demand reading with 200
27

The powerline carrier pilot is funded outside the AMI Program.

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residential meters. This pilot involved three components: network management, substation control, and meters with an AMR module. This pilot test provided a better understanding of project costs, equipment installation, reporting capabilities, alarms and other features. It also gave SCE experience with polling strategies and capabilities, and provided an opportunity to test vendor support/ availability and responsiveness. 2. SCE initiated a proof of concept of Broadband over Power Line (BPL) communication technology in 2005 28 to determine potential utility uses for communications over an energized power line. This testing includes two electric meters and demand response devices in the context of AMI. One objective of the ongoing testing and evaluation is to understand the real-world operating implications of such a system and examine the feasibility of utilizing BPL in support of AMI. 3. SCE has just acquired three different remote disconnect switches, and will perform component level evaluation of these devices in preparation for conducting tests on the meters with integrated switches once those products are received. (SCE expects to begin receiving integrated meter products in August 2006). 4. SCE will conduct an evaluation of 900MHz Radio Frequency (RF) at a vacated residential area in a former military base to help us understand certain characteristics of RF and do some high level validations of our computer models. E. Acceptance of AMI Systems Among Other Utilities SCE has researched the current status of AMI acceptance across the nation and in other parts of the world. 29 The outcome of this research shows there is clearly a significant trend towards new technologies with the utilities themselves providing much of the impetus for manufacturers to advance their products. Worldwide, utility adoption of advanced metering is increasing for a number of reasons. Technology is enabling cost-effective robust solutions that provide more benefits than remote meter reading alone. There is growing interest in using
28 29

The BPL proof of concept is funded outside the AMI Program. A more complete description of this research is contained in a separate report sponsored by SCE entitled AMI Project Assessment and Analysis, authored jointly by Positive Energy Directions and Corepoint Associates, Inc., dated June 9, 2006.

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advanced metering for demand response, grid automation applications and other customer benefits. Prices for AMI systems are declining, making the range of solutions more attractive than in the past. Utilities are still deploying AMR systems but the number of utilities pursuing business cases and deployments for advanced AMI systems is increasing. For example, Manitoba Hydro in Canada recently announced it will be the first utility to deploy a new, advanced metering and communication technology 30 that comes very close to SCEs vision for AMI. This technology combines two-way communications to each meter with an open-protocol, standards-based architecture. It provides options for radio frequency, power line carrier, broadband over powerline as well as many other public, private, wired and wireless Internet Protocol-based communications networks operating as standalone or in combination. In addition to Californias AMI initiative, many other utilities across North America and Europe are investing in technology to replace manually-read meters. U.S. utilities have installed over 27 million remote-read meters out of a total market of 130 million and have announced plans to install another 30 million meters. Many other utilities are also considering their options as the technology improves and costs decline. The factors behind this recent increase in interest and visibility have been well documented: state regulatory policies; the federal Energy Policy Act of 2005 (EPACT); 31 the need for operational improvements; cost savings through personnel reductions, opening of markets (necessitating different billing methodologies); and the buzz of the smart grid and potential new business opportunities. These factors are coupled with advances in technology and computational power, which finally allow some of the promises of advanced systems to be realized.

30 31

Manitoba Hydro / ITRON Corp. Joint News Release, dated June 29, 2006. EPACT specifically requires all state commissions to analyze the potential for intelligent metering and report back in 18 months but fails to provide any penaltiesor rewards.

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Utilities are investing in a wide range of metering technologies and systems. The largest electric deployments recently announced include a 3.8 million unit deployment of a fixed radio network advanced meter system (DTE Energy), a 5 million electric meter 2-way communicating power line carrier based AMI system (Pacific Gas and Electric) and a 2 million meter BPL deployment by TXU. Some utility deployments, such as Progress Energys 2.7 million meter deployment, involve installing meters that initially communicate to a mobile drive-by receiver that can be upgraded to a fixed network communications system later. The French utility EDF and the Netherlands utilities Nuon and Energined are all pursuing advanced metering, representing a combined total of over 40 million total meters. Although different electric technical standards exist between Europe and North America, innovation to meet a growing advanced meter market on both continents is getting meter vendors attention. Growing interest in AMI by state and federal regulators in the United States is causing many large utilities to consider advanced meter technology. As a result, the market for AMI is clearly growing and vendors are taking notice. All of the major meter manufacturers are adding AMI functionality to their basic residential meter. AMR/AMI solution vendors are expanding their communications throughput capability and reach.

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IV. A. Overview

SYSTEM DESIGN

The increasing pace of transformation and innovation within AMI technologies present unique opportunities for utilities. SCEs Systems Engineering approach addresses the need to understand all aspects of the system functionality at the beginning of the program to more fully determine what is needed to create the business and technical solutions. The resulting clear definition of the end state helps lead to a better selection of technologies and vendors, and reduces the risk of rework later on. Those benefits mean saving money in the long run. The Systems Engineering approach also provides a structured framework for understanding the value and risks inherent in deploying complex systems such as AMI. SCEs Systems Engineering approach is an iterative process of understanding and mapping a complex solution at successive layers of detail starting with a functional vision, and working through lower layers of functional decomposition. This is done by identifying technical approaches and mechanisms that support the functional vision while simultaneously supporting SCEs enterprise standards. The process results in a series of engineering decisions that yield a preferred solution independent of selecting a specific metering, communications and MDMS technology platform. SCEs preferred solution, represented in this conceptual architecture, serves as input into vendor evaluations, business case estimates, integration and testing plans, and provides a means to accelerate platform specific AMI engineering and deployment tasks once a specific set of technologies has been selected. AMI is not just a single system, but rather a System of Systems independent of each other and organized to perform collaboratively and coherently. Understanding AMI as a System of Systems provides the foundation for a Systems Engineering framework

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that clearly defines AMI scope boundaries and allows the AMI System Design team to understand and evaluate vendor solutions and technologies in the context of the whole solution. Our Systems Engineering approach during Phase 1 is focused on the delivery of an AMI Reference Architecture. This Reference Architecture consists of three steps with progressively elaborated architecture detail. The first activity involves developing a platform independent conceptual reference architecture. The second step is focused on developing platform independent logical reference architecture with a focus on security and message architectures. Once the specific meter, meter data management, and communication technologies are chosen, the reference architecture progresses to a platform specific model developed in collaboration with engineers from the selected vendors. SCEs Systems Engineering approach represented in Figure IV-3 shows AMI as a System of Systems with the technical decomposition levels shown in the top dimension and the levels of architecture detail shown in the vertical dimension.

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Figure IV-3 AMI System of Systems Levels

SCEs approach considers not only the architecture and system design of AMI within this System of Systems but also how it fits within the SCE enterprise. Engineering decisions are made by working from the requirements and a high level of system design abstraction to lower levels of abstraction as we map and refine what element of the AMI System of Systems will satisfy which requirement. This provides a diverse audience the ability to understand how the technology will be used to enable the business scenarios within a particular use case. SCEs Systems Engineering approach yields views of the AMI architecture at increasing lower levels of abstraction by answering the questions, Why?, What?, How?, and With What?, and describing the answers in the System of Systems context.

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B.

SCE AMI Engineering Principles SCEs AMI solution embodies the design goals of Availability, Reliability,

Interoperability, Serviceability and Securability (ARISS) through adherence to sound architectural principles. These design parameters describe behaviors that are neither easily measurable nor testable at an independent component or subsystem level but rather must be understood in the context of the entire AMI solution. Design is the process of making decisions on what is necessary to bridge the gap between architecture and implementation. The AMI System Design team considers the effect of one design parameter on another and the trade-offs between each. Understanding the subtleties of these trade-offs is required in order to deliver a successful AMI solution. SCE System Engineering group has established a number of guiding principles that are drawn upon in all of the system engineering endeavors. These principles are largely compatible with the stated design principles of the other industry groups that SCE has drawn upon at various times in the production of this work, including the Gridwise Architecture Council (GWAC) Constitution, IntelliGrids Design Principles, as well as the principles defined in the CEC Demand Response Reference design as adopted by OpenAMI. All architectures developed to meet these principles shall be requirements driven and value oriented. The principles that guided SCEs design include: Availability is the percentage of the scheduled uptime during which a system is actually available to users. Availability affects service at many levels. Reliability is the probability that a component will perform its required functions for the duration of a specified time. Interoperability (a.k.a. Openness) is the degree to which the systems configuration permits transparent access and integration among multi-vendor equipment and applications. An open/interoperable environment permits vendor-independent

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solutions, improves competition, and allows independence and flexibility. Interoperability includes the following elements: Serviceability - The ease with which corrective maintenance or preventative maintenance can be performed on a system. Higher serviceability improves availability and reduces service cost. Serviceability is a broad definition which includes the following system behaviors and design principles. Manageability is the degree to which available system administration and application management resources can maintain and operate the system. It is the degree to which the configuration minimizes maintenance requirements and supports problem evaluation and easily replaceable components. Maintainability is the probability that a failed component is returned or restored to a specified condition when maintenance is performed by personnel with specific skill levels, using prescribed procedures and resources Extensibility is a system design principle where the implementation takes into consideration future growth. It is a systemic measure of the ability to extend a system and the level of effort required to implement the extension. Extensions can be through the addition of new functionality or through modification of existing functionality. The central theme is to provide for change while minimizing impact to existing system functions. Securability is similar to Manageability in the way it affects the solution. Securability includes the following features: Authentication Establishment of the validity of the originator of a transmission or message. Authorization Verification of an individuals right to access specific system resources. Confidentiality Assurance that information is not disclosed to unauthorized persons, processes, or devices. Data Integrity Assurance that data is unchanged from its source and has not been accidentally or maliciously modified, altered, or destroyed. Non-Repudiation Assurance that the sender of data is provided with proof of delivery and that the recipient is provided with proof of the senders identity, so neither can later deny having processed the data.

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Availability Assurance that allowing the sharing of information will not create situations in which authorized users are denied service. C. Identifying AMI Requirements In this section, SCE describes the process used to develop functional requirements (those that define the capabilities and business functions required) and non-functional requirements (those that define the performance and engineering standards to be met) for SCEs AMI program. 1. Use Case Framework SCE leveraged the prior efforts of the Electric Power Research Institutes (EPRI) IntelliGrid project and the OpenAMI Task Force to provide an initial guiding framework and scope for the requirements gathering process for the SCE AMI project. Because these two projects utilized Use Cases 32 as a means of gathering AMI system requirements, and because Use Cases have become a proven method for the collection and documentation of both functional and non-functional system requirements, SCE also adopted the Use Case process for its AMI development project. The Use Case approach represents a rigorous in-depth methodology for identifying necessary functionality and vendor product requirements. Use Cases place particular emphasis on how the metering system will be used when deployed. The process focused on usage-based requirements to achieve a functional goal, rather than being constrained by existing product design. SCEs intent is to clearly define the desired requirements, leaving vendors as free as possible to come up with innovative solutions.

32 Based on widely accepted Use Case Methodology for identifying new product requirements. For example: Schneider, Geri and Winters, Jason P., Applying Use Cases: A Practical Guide, AddisonWesley, 1998.

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A Use Case is simply a story that includes various actors, and the path they take to achieve a functional goal. By considering the actions of various actors working to achieve a functional goal, a completed Use Case results in the documentation of multiple scenarios, each containing a sequence of steps that trace an end-to-end path. These sequential steps describe the functions that the proposed systems and processes must provide, directly leading to the requirements for the given Use Case. In all, 18 separate Use Cases were analyzed in six categories, representing 99 separate potential scenarios of how AMI might be utilized to either improve SCEs service levels, lower cost, or both. Table IV-11 lists the 18 AMI Use Cases employed in the System Design process. Summaries for each of the 18 Use Cases are contained in Appendix A of this report. Complete Use Case Documentation is available on SCEs AMI website at (http://www.sce.com/PowerandEnvironment/ami/TechDevelop).

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Table IV-11 Use Cases with Descriptive Titles


Use Case ID B Series B1 B2 B3 B4 C Series C1 C2 C3 C4 D Series D1 D2 D3 D4 E Series E1 E2 I Series I1 I2 I3 S Series S1

Use Case Descriptive Titles Billing and Customer Service Multiple clients read demand and energy data Utility remotely connects/disconnects or limits customer usage Utility detects tampering or theft at customer site Contract meter reading (or MR for other utilities) Customer Interface Customer reduces demand in response to pricing and/or grid event Customer has access to recent energy usage and cost at their site Customer prepays for services External clients use the AMI system to interact with customer devices Delivery Distribution operator curtails/limits customer load for grid management Distribution operators optimize network based on data collected by AMI system Customer provides distributed generation Distribution operator locates outage using AMI data and restores service Energy Procurement Real-time operations curtails or limits load for economic dispatch Utility procures energy & settles wholesale transactions using system data Installation and Maintenance Utility installs, provisions, and configures AMI system Utility manages end-to-end lifecycle of the meter system Utility upgrades AMI system to address future requirements Field Services & System Recovery AMI system recovers after outage, communications, or equipment failure

2. Use Case Internal Workshop Process Cross-functional teams were assembled and given ownership and responsibility for developing each Use Case. Each of the six high-level Use Case

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categories was assigned a leader who was given the responsibility of oversight, consistency, and delivery of all Use Cases within the category. Each individual Use Case was assigned an SCE subject matter expert with specific knowledge and experience in multiple key functional areas impacted by the given Use Case. Members of SCEs Consulting System Engineer (CSE) team were responsible for organization, logistics, and delivery of Use Case workshops, including providing time and agenda management, and interjecting relevant external knowledge. Up to 15 SCE subject matter experts (SMEs) were strategically selected from multiple functional organizations to create a cross-functional team for each Use Case. Team members were expected to attend all internal workshops scheduled for their Use Cases and to provide relevant insights from their departments towards shaping AMI requirements for the Use Case. More than 140 SCE SMEs were involved in the Use Case Workshops, and several SMEs served on multiple Use Case teams. Various departments from SCEs Customer Service, Transmission and Distribution, IT, Power Procurement, and Shared Services Business Units, among other groups, were represented on the AMI Use Case Teams. Use Case workshops were conducted internally among affected SCE organizations between November 2005 and February 2006, with the number of workshops per Use Case varying from two up to five depending on the anticipated volume of subject matter to be discussed for each. During the course of the internal workshops, nearly all of the Use Cases were discussed across multiple sessions, allowing for an iterative process for requirements development. Resulting ideas and issues from workshops were reviewed and analyzed by Use Case teams and the System Architecture Team (SAT) for requirements refinement in follow-up sessions. This process helped ensure that a robust and complete set of requirements was generated for each of the 18 Use Cases. Upon completion of the Use Cases, the resulting requirements were used to develop reference architecture for an open, standards-based AMI solution, to refine
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assumptions used to develop costs and benefits included in the AMI business case, and as a tool to help communicate SCEs vision for AMI to technology vendors, standards groups, external utilities, regulators, and other stakeholders. SCE arranged with the Electric Power Research Institute (EPRI) to allow the adoption of the output of SCEs Use Cases for integration with the IntelliGrid Architectural Model. Under this arrangement, SCEs results will be made available for widespread use by the energy industry. 3. Use Case Workshop Completion and Documentation A total of 44 AMI case workshops were completed for all 18 Use Cases by March 1, 2006, resulting in more than 400 distilled functional and non-functional requirements. 33 Coinciding with the completion and approval of the final workshop, key content information was consolidated into a Use Case Document for each of the 18 Use Cases. These documents represent the combined results of all of the workshop sessions for the given Use Case, and will serve as living documents with content updated to reflect the most current information. Use Case documents consist of the following key components: 34 Use Case Summary Brief description of the scope, objectives, and rationale of the Use Case. Use Case Narrative - A description of the functions included in the Use Case from the Primary Actors point of view. The narrative serves as the basis for identifying scenarios and summarizes key sources of business value included the Use Case. Business Rules & Assumptions Description of any business rules, assumptions and policy constraints that apply to the Use Case
33 34

SCEs requirements are consistent with the set of high-level requirements for AMI meter and communications systems recently adopted by UtilityAMI. Use Case descriptions and summaries are contained in Appendix A hereto

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Actors List of the primary and secondary actors involved in the Use Case. Actors might include all the people (their jobs), systems, databases, organizations, and devices involved in or affected by the scenarios contained with the Use Case. Scenarios and Scenario Steps For each scenario included in the Use Case, this section includes a description of the overall scenario and then outlines all the steps that implement the scenario. Scenarios that successfully complete without exception or relying heavily on steps from another scenario are classified as Primary scenarios; all other scenarios are classified as Alternate. Requirements (linked to scenarios/steps) List of all Functional, Nonfunctional and Business Requirements generated from the workshop scenarios. Information Exchange Matrix & Sequence Diagrams - Provides details on information exchange, actor interactions and sequence diagrams. This section was completed during the Use Case Stabilization process by members of the Engineering Team. 4. AMI for Gas and Water Meters In accordance with SCEs Settlement Agreement regarding the engagement of gas and water utilities in SCEs service territory, 35 SCE contacted representatives from Southern California Gas Company, Southwest Gas and the City of Long Beach as well as several municipal water utilities with which SCE currently has meter reading contracts and invited them to participate in a Use Case workshop to explore potential use of SCEs AMI for gas and water meter reads and other functionality. The workshop was attended by representatives from Southern California Gas Company, the City of Long Beach, Rancho California Water District, Irvine Ranch Water District, and Southwest Gas. The workshop was conducted in a similar but abbreviated manner as SCEs internal Use Case workshops, and resulted in a fully
35 SCEs Phase 1 AMI Settlement Agreement, adopted in D.05-12-001, at Attachment A, fn.1: SCE will assess the feasibility of incorporating interfaces for gas and water utility automated meter reading into its AMI system and use its best efforts to explore such functionality with gas and water utilities in its service territory. SCE will use its best efforts to investigate methods to protect customer privacy and incorporate such methods where feasible.

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developed Use Case for Contract Meter Reading. In general, some of the gas and water utilities indicated interest in exploring opportunities to use SCEs AMI, while others indicated they may consider alternative approaches such as mobile meter reading systems. SCE will continue to work with these utilities as its AMI project develops. 5. Requirements Refinement Following requirements distillation, three additional processes were applied to refine and complete the set of AMI requirements that would serve as the communication to vendors. These processes were: a) distillation of requirements including benchmarking with other utilities in North America; b) validation of requirements against the cost benefit analysis; and c) validation of requirements against market availability. a) Distillation of Requirements Once the Use Cases were finalized, SCE conducted a process to distill and consolidate the requirements. The distilled requirements were then mapped to the architectural components for subsequent architecture work. These requirements became the foundational set of requirements representing all the potential uses of the AMI system for SCE. As part of the distillation process to ensure that the list of requirements was sufficiently complete, SCE also undertook a process to review recent AMI Requests For Proposals (RFPs). Hydro One provided its requirements for review, and the San Diego Gas & Electric Company (SDG&E) AMI requirements were made available to UtilityAMI members. The review of these requirements allowed SCE to ensure completeness in the scope of the final meter and telecommunications requirements.

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b)

Validation of Requirements (Cost Trade-Off Analysis) The cost benefit analysis began in March and ran in parallel with

the conceptual architecture work and requirements distillation. During this parallel effort, decisions were made regarding which Use Case scenarios could be supported by benefits. Those that were supported by benefits (or were otherwise mandated) were identified as high relative benefit and/or high importance (mandates). The requirements supporting those scenarios were identified as must have requirements (ultimately labeled as Priority 1 requirements). Priority 1 requirements are generally consistent with vendor product availability in 2006 as described below. Requirements that were thought to be within the product development reach of vendors over the next 18 months (by year end 2007) and could potentially add material value to the system were identified as Priority 2. Those scenarios that could not be supported by benefits (or did not have enough information to determine the benefit at this time) were given medium or low relative benefit or importance and the requirements supporting those scenarios were identified as nice to have (ultimately labeled as Priority 3). c) Validation of Requirements Against Market Availability Through the continued engagement with suppliers of AMI technologies, SCE found that there is considerable diversity in not only the capabilities, but in the basic approach and stated strategic directions of the technology vendors. It was necessary to objectively understand the capabilities of various solution components and to effectively communicate desired features to support SCEs requirements. Inspired by the Technology Capabilities Maturity methodology (TCM), 36 SCE developed its own framework that provided a series of 0 to 5 ratings scales for evaluating the desired

36

Based on CFTP developed by J. Paap, MIT. See Customer Focused Technology Planning: An Overview, Jay E. Paap, copyright 1996.

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capabilities of AMI technology. Separate sets of TCM scales were developed for the metering capabilities and the communications capabilities. The TCM scales serve as a tool to communicate SCEs perspective on the current state of the art, as well as to define an evolutionary path for capabilities that SCE considers central to advanced metering. The capabilities identified were primarily created based on the consolidated, distilled requirements from SCEs workshops, while also drawing from industry standards for similar metering and communications systems. SCE used the TCM scales to gauge the relative maturity of metering and communications technology available from suppliers today, as well as that expected to be available in the near future. This enabled SCE and suppliers to discuss product availability timelines and capabilities in the context of the TCM scales and to assist in the refinement and prioritization of the Preliminary Requirements that SCE published on June 30, 2006. SCEs Preliminary AMI Requirements are described in Appendix B hereto. 37 The TCM methodology is based upon identifying technology categories, and within each of those categories identifying specific capabilities that are desirable and necessary to meet the requirements captured for SCEs AMI deployment. The metering and communications technology capability categories used are shown in Table IV-12 below.

37

The complete set of 430 Preliminary Requirements is available for download in spreadsheet form on the Vendor Information page of SCEs AMI web site (http://www.sce.com/PowerandEnvironment/ami/TechDevelop/vendor/).

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Table IV-12 TCM Categories Used to Evaluate Metering and Communications Capabilities
Metering Capability Categories 1. Disconnect 2. Configurability and Programmability 3. Serviceability / Diagnostics 4. Power Quality 5. Memory 6. Reliability 7. Interoperability 8. Display 9. Security 10. Tamper / Theft Detection Communications Capability Categories 1. Architecture Flexibility (computing platform: Micro-controller unit, storage and memory) 2. Availability 3. Home Area Network (HAN) 4. Interoperability (Meters to Communications) 5. Reliability 6. Scalability 7. Security 8. Serviceability / Maintainability 9. Throughput (Daily) 10. Throughput (on demand poll) 11. Wide Area Network (WAN) and/or Neighborhood Area Network (NAN)

The capabilities associated with each category are presented in a table as columns ordered from most technologically advanced on the left to least advanced on the right. The rows of the table indicate a capability maturity level on a scale from 0 to 5 that represents an overall index of the relative level of technology capability, where 0 represents the least capable and 5 represents the most capable and most advanced from SCEs perspective. As an example, Table IV-14 illustrates this framework for the disconnect capability, category number one in the Metering Capabilities Framework.

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Table IV-13 Service Disconnect Device

For a specific meter to qualify as achieving a level 1 capability for the disconnect category, it must implement the following technologies and capabilities: The disconnect device must be integrated within the meter itself, It must support a 200 amp load break capability, It must support voltage sensing on both sides of the disconnect, and It must support remote connect and disconnect. Appendix C of this report, Metering Capability Framework, contains a description for each of the 10 metering capability categories, provides the capability framework for each category, and provides detailed descriptions for the technology capability column headings. Appendix D of this report, Communications Capability Framework, contains the same information for the 11 communications capability categories. These appendices also contain a glossary of terms and definitions used in these descriptions. These terms and definitions are extracted from the glossary being developed and maintained by UtilityAMI. 6. Results and Conclusions from Requirements Gathering The requirements gathering process played an important role in the early stages of SCEs AMI phase 1. The process served to:

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Validate the suspected high-level conceptual requirements and SCEs vision of the AMI; Provide sufficient detail around the requirements in order to communicate to the vendors; Provide opportunities to engage the vendors in discussions of developing requirements and the value of the requirements and uses of the AMI through sharing of intermediate work products like the Capability Frameworks; Facilitate discussions with other utilities by sharing SCEs process through organizations like EPRI and UtilityAMI and thereby encouraging the development of standards as well as the market for next generation AMI products; Identify the existing and new systems and processes with which the AMI and the Meter Data Management System (MDMS) would have to interface, providing an accelerator to the system integration project; Facilitate a grass-roots communication of the AMI program throughout SCE due to the engagement of many employees in the workshop process; and Uncover the level of interest of some gas and water utilities in using SCEs AMI for meter reads and other informational purposes such as leak detection.

D.

SCEs Conceptual Architecture for AMI As mentioned in the discussion of the Systems Engineering Approach above, the

conceptual architecture is the first step in the development and deployment of the AMI system. The intent of the conceptual architecture is to identify key constructs including significant architectural elements, such as components and the relationships among them. Each requirement necessary to support the uses of AMI is then mapped to the architectural element that will satisfy that requirement. Although the conceptual architecture is abstract and independent of any particular communications platform, the description of AMI is nevertheless very powerful in communicating its capabilities and is therefore vital to defining the scope of what must be designed and deployed.

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The summary of the conceptual architecture presented below consists of several high level diagrams that identify the key architecture elements, or actors, and the interrelationships between them. The diagrams below are supported by the Architecture Component/Actor Descriptions provided in Appendix E hereto. A summary of SCEs Preliminary AMI Requirements can be found in Appendix B, and on SCEs web site at www.sce.com/ami. 1. High Level Interface Figure IV-4 is a high-level interface diagram of SCEs envisioned AMI, depicting the principle interactions between all actors. It is essentially a data flow diagram that shows the flow of data from the source actor to the destination actor without showing the intermediate actors that may transfer the data. Specifically: The Interface Diagram only shows the endpoints of communication. The underlying physical network, and any routers or bridges, are not shown as part of the path. Only actors that play a critical role in the evaluation or transformation of a message are included in the path. Customer equipment is represented by three different actors: Load Control Device, Display Device, and Monitored Equipment. This is represented in this way because the type of equipment found on the Customer Premise may vary considerably among different premise types (i.e., residential, commercial buildings, etc.). A fully functional Building Management System would implement all three of these functions as well as supervisory programming to link them together. A residential household, on the other hand, might only have a Programmable Communicating Thermostat (a Load Control Device) or a simple display similar to an SCE Energy Orb (a Display Device). Non-energy utility equipment like a gas meter would be considered Monitored Equipment, as would non-SCE metering equipment owned by the customer for purposes of distributed generation. Not all human interfaces are shown. The Customer and Customer Representative interfaces are modeled in great detail in the Use Case scenarios because of the importance of the Customer and the Customer Premise in these Use Cases. A number of other human

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beings are also shown on the diagram, but their interfaces are not modeled in detail. This is done purposely because the AMI project will not have control over most of these interfaces. A "Data Retriever" may be one of many different systems. There are a number of clients of the AMI system envisioned both inside and outside the utility that are shown in the Interface Diagram only as "Data Retrievers". These may include load forecasters and network planners, for instance. This simplification is made because it is expected that the interface to any of these actors will either be Validated Measurements, for systems that require billing-quality data, or Aggregated Measurements, for systems that require quick response and whose requirements for data quality are not as strict. For the purposes of defining interfaces at this level, it is sufficient to model these clients as a single type of actor. Systems are modeled only to the extent they interact with the AMI. For instance, the Grid Control Center actor represents the grid control center itself, the Energy Management System, the SCADA system, the Distribution Management System, and the automation systems found in all the substations in the network. Each of these systems may have many smaller components. However, for the purposes of discussing the AMI, these can be simplified to the Grid Control Center, the Outage Management System, and the Distribution Automation Node.

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Figure IV-4 High Level Interface

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2. Component Architecture Figure IV-5 represents a more specific view of SCEs high-level system architecture from the AMI Communications network out to the Customer Premise. This is a particularly useful view in isolating the technical areas where the System Design Team needed to focus on the conceptual feasibility of available technologies. The SCE AMI Conceptual Architecture is a logical depiction of the individual elements (components) and the requisite collaborations between the elements required to support the functionality detailed in the Use Cases. The components described here are not meant to represent discrete products or even devices. While they may in some cases map to a single physical device in a particular industry solution, they are not meant in aggregate to constitute a physical description of the ultimate system. SCEs high level component architecture resulted from fusing the analysis of both existing and emerging AMR and AMI systems with current trends in both distributed multi-agent systems and distributed sensor networks. The resulting model was then juxtaposed against the functional concepts that were developed in our early Use Case workshops. The result is a reasonably robust model that enables discussion of the features of an AMI solution in generic terms. The component model serves not only as a valuable tool to compare and contrast the technical and functional aspects of available solutions in the marketplace, it also provides a means for understanding the coverage of the solutions and where a particular approach may need to be augmented to meet SCEs needs.

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Advanced Metering Infrastructure Conceptual Feasibility Report

Figure IV-5 AMI System Conceptual Component Diagrams

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Advanced Metering Infrastructure Conceptual Feasibility Report

E.

Home Area Network SCE has conducted research on Home Area Network (HAN) communications

protocols and mediums. The research examined both wired and wireless solutions including HomePlug, WiFi, ZigBee, Z-wave and proprietary solutions. It is apparent that ZigBee will likely be the industrys leading choice for a HAN communications protocol for residential applications. This research was done in connection with developing requirements for the CECs Title 24 PCT with other investor-owned utilities, municipal utilities and manufacturers. A viable SCE version of the PCT (SCE Smart Thermostat) that meets both the CEC Title 24 standards and communicates with SCE's AMI system is critical to the overall success of SCE's AMI program. Therefore, SCE will also continue to work concurrently with the CEC, thermostat manufacturers, standards groups and industry stakeholders to define appropriate communications requirements for the SCE Smart Thermostat.

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Advanced Metering Infrastructure Conceptual Feasibility Report

V.

CONCLUSION

SCEs accomplishments in the Concept Definition stage are ahead of expectations. As described in this report, all objectives have been met or exceeded, and the results are universally positive. SCEs vision to develop the meter and communications systems technical requirements and to fully integrate currently available modern-day technology into a new generation of utility-friendly vendor products is already beginning to be realized. SCEs collaborative process with vendors and other stakeholders is helping to establish new standards for AMI, and is serving as a catalyst to spur industry-wide product development. SCE is confident that an AMI solution that meets its metering and communication systems requirements will soon be available from vendors. The added functionality of this next-generation of meters is expected to reduce costs and add benefits that will result in a positive business case for full AMI deployment. The results of SCEs preliminary cost benefit analysis indicate the benefits and costs are above the break-even point. From the negative net present value (NPV) of $490 million determined in the March 2005 analysis, SCE now shows a significant directional improvement resulting in a positive NPV estimate of $24 million.

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Appendix A Use Case Summaries

Advanced Metering Infrastructure Conceptual Feasibility Report

Appendix B Description of SCEs AMI Preliminary Requirements


Note: Appendix B contains a general description of the content of SCEs AMI Preliminary Requirements documentation and the process used to define these requirements. The Preliminary requirements themselves can be accessed on SCEs AMI web site (www.sce.com/ami) on the Vendor Information page under the Technology Development category. Select from the following documents: AMI Preliminary Requirements v1.1 060630.xls, SCE Specification E-100 Revision 5.1.2.pdf.

Advanced Metering Infrastructure Conceptual Feasibility Report

Appendix C TCM Scales Metering Master

Advanced Metering Infrastructure Conceptual Feasibility Report

Appendix D TCM Scales Communications Master

Advanced Metering Infrastructure Conceptual Feasibility Report

Appendix E Architecture Components and Actors

Advanced Metering Infrastructure Conceptual Feasibility Report

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